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Former US Treasury official warns about Russian economic crisis causing global financial collapse

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(NaturalNews) The economic condition in Russia is continuing to deteriorate due to a combination of factors, as the country's financial institutions try to intervene in order to head off a full-fledged monetary collapse.

As reported by Britain's The Telegraph newspaper, a former Russian finance minister is warning that the country faces a "full-blown economic crisis," and is now forced to take emergency economic measures. One of them includes the Russian central bank injecting billions of rubles' worth of liquidity into failing banks (bailing them out with public money, if you will).

The Telegraph went on to to describe the origins of the current crisis:

The economy has been battered by a wave of sanctions as a result of tensions over Ukraine, geopolitical uncertainty, and falling oil prices.

Alexei Kudrin, a former finance minister and once considered an ally of President Vladimir Putin, said: "Today I can say that we have entered or are currently entering a full-blown economic crisis. Next year we will feel it in full force."

Worse to come

Some economists and financial analysts, the paper said, have warned that Russia's economy is not expected to improve in the long run unless two things happen: The oil price skyrockets again, or Moscow's relations with Ukraine improve.

"As for what the President and government must do now, the most important factor is the normalisation of Russia's relations with its business partners, above all in Europe, the US and other countries," Kudrin said at a press conference in Moscow recently.

His comments came as a new twist in the Russian economic crisis occurred: the central bank stepping in to bail out a mid-sized bank.

The Central Bank of Russia (CBR) announced a plan to loan Trust Bank about 30 billion rubles (about $531 million, as reported by The Washington Post on December 22); analysts, meanwhile, warned that Russia's banking sector was particularly vulnerable during the worsening financial crisis.

Anna Stupnytska, an economist at Fidelity Solutions, told The Telegraph that "the risk of a sovereign default is low, it's the corporate sector where the main vulnerabilities lie, and banking in particular."

She added: "Due to sanctions, companies cannot refinance their debt as access to international markets has been essentially cut off."

Trust Bank has placed a number of advertisements featuring American actor Bruce Willis in Russia, featuring the quote, "When I need money, I just take it." That ad run began in 2010, The Wall Street Journal reported.

A Russian government agency that provides deposit insurance will "hold a complex assessment of the bank's financial standing in order to determine further financial resolution measures," a CBR statement said.

World is reorienting away from the U.S.

The Washington Post noted that Trust is probably just the first in a long line of Russian banks that will need to be bailed out.

Also, the paper noted other underlying factors that have led to the bank's troubles:

Trust's problem, though, was just run-of-the-mill greed. It promised depositors very, very high interest rates--as much as 8 percent on dollar accounts--to try to lure customers away from other banks. But that meant it'd have to earn very, very high returns on its investments to stay solvent. It couldn't do that. Nobody in Russia can, now that the economy, which insofar as it exists, is just one big oil exporting business that has crashed with crude prices.

The Post further noted that the bank was even unable to borrow money to sustain itself, because Western-imposed sanctions over Ukraine cut it off from international credit markets.

Dr. Paul Craig Roberts, columnist, author and former Reagan Administration Treasury official, noted that the old world order is beginning to shift dramatically, and it will continue to do so -- especially the global economy.

"Clearly, a large part of the world -- half of it or more -- is in the process of trying to reorient itself away from the West [by which he means primarily the U.S.]," he told King World News in a recent interview. You can hear that interview in its entirety here.






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